What is a reverse auction?

The reverse auction is simply another way (the best way) to get the best price from your qualified vendors. A reverse auction is a web-based sourcing event in which qualified vendors competitively bid to win your business, having already demonstrated themselves to be qualified on other deciding factors.

One way to think of reverse auctions is to picture ‘ebay in reverse’ where qualified suppliers bid their prices down versus up in a live virtual event that is typically completed within one hour.

Is it true that reverse auctions force competition on price-only?

No. Reverse Actions are actually just a step in a normal sourcing/procurement process. Just like a traditional RFP process, you define your requirements in different sections of sourcing document, you apply weights to different things such as service levels, location, MWBE, and Pricing.

Awards are often made to bidders other than the lowest price based on non-priced variables, however the reverse auction process works to drive the entire set of suppliers downward in their pricing, benefiting you as the buying entity.

Is it true that reverse auctions are only relevant for commodity items?

No. Reverse auctions can be used for a wide range of goods and services. A reverse auction with Procurex includes a process of normalizing the requirements for vendors – whether that be performance metrics of a supercomputer, or the service levels for waste hauling or guard services, we help you define a common set of non-price items on which vendors will compete.

The Vendor
Relationship

How do we get our vendors to participate?

We take care of that for you. Your organization can provide a preferred vendor list. Procurex can manage the outbound communication to inform vendors of a reverse auction event, educate them on the process and train them in the use of the reverse auction platform. Additionally, Procurex can solicit additional vendors for your review, approval in inclusion in the event.

Do reverse auctions have a negative impact on vendor relationships?

No. In fact, for most of your vendors, reverse auctions have become a fact of life. You are not forcing them to compete solely on price. You still evaluate them on various non-price factors, but you are ensuring that each vendor is giving you their best price. In fact, as long as vendors know that those non-price factors have been structured in such a way as to keep the playing field level, they appreciate the transparency of the transaction.

They are also provided with real time pricing information that can be invaluable for them in understanding their market position.

What do participating vendors see during the auction?

Vendors have a very similar view as you, the client, but in their environment, they cannot see who the other vendors are. Where you might see Dell, Lenovo and HP, each of the participating vendors would see Vendor 1, Vendor 2, etc.

The Auction
Process

How does the actual auction event take place?

Procurex will manage the vendor invitations, communication and training prior to the auction event. We host and manage the online event itself, providing real time monitoring and support to your organization and participating vendors.

Unlike eBay™ or a electronic quoting tool, reverse auction events are virtual and ‘live’ and generally run across a 1 hour period.

How long does the auction last?

Auction duration ranges from a few minutes to a couple of hours. The length is determined by the nature of the goods being auctions. Events for commodity items can be completed in a few minutes. More complex items or sets of items can require more time as vendors sharpen their pencils behind the scenes.

How can I watch the auction?

You view the auction online by logging into our secure reverse auction environment. There you can see each vendor, their current submission, and watch as successive bids are submitted.

If we do a reverse auction, is my organization required to accept the lowest bid?

No, the buying entity would evaluate the online bids against their own criteria for value, price and vendor qualifications – just as they would in a normal RFP process.

Once we conduct a reverse auction, are we required to make an award?

No, if you are not satisfied with the bids – for price or other reasons, you are free to reject the results of the auction.

It is key however that vendors view the reverse auction as a contracting event and not just a price ‘fishing’ exercise. This ensures that they provide their best pricing in this exercise, as they know that a contract award hangs in the balance.

Costs &
Savings

How much does the service cost?

Typically, the service costs are built into the pricing that Procurex generates via our reverse auction platform in a ‘supplier pay’ model. The winning supplier pays a small fee (built into their pricing) that covers the cost of the event, and you would never see an invoice from Procurex for this service. There is never any cost for suppliers to register and participate in a reverse auction event. Procurex can also customize a pricing model that works best for you, including a per event fee model, annual seat licensing or multiple event packages.

How much money can my organization save?

Our customers save on average 14%-18% on an auction, but the specific amounts can vary greatly.

Starting in the early 1990’s conducting live, paper-based, Procurement Reverse Auctions, for General Electric, his Purchasing experience and reverse auction knowledge has helped build the Procurex system into the best reverse auction system on the market. Customer success is at the heart of all Procurex does. Marty has led the Procurex Operations Division to focus on client success, flawless but user-friendly software, and high-touch, quick response Help Desk support.

Marty’s career includes being a founder and principal of Procurex, Certified Purchasing Manager (CPM), 6-Sigma Green Belt, Global Sourcing Manager, and Procurement Process Consultant. Marty has a Penn State MBA and BS in Economics from Allegheny College.

In his spare time, Marty enjoys spending time with his wife, Lorraine, and 3 sons, Matt, Eric, and Nick, and playing volleyball, softball, and golf.

Micheal MacKinnon

Prior to joining Procurex, Michael held various roles within the Corporate Executive Board (CEB) across a six-year tenure, culminating in managing the North American client services operations for the Procurement Strategy Council, a program whose membership included more than 600 large institutional organizations and was tasked with solving the most challenging procurement issues.

Michael has a bachelor’s of science degree in business from San Diego State University and a master’s degree in business administration from the University of Southern California’s Marshall School of Business.

Michael enjoys spending time with his wife, Laurel, and two young children, Amelia and Becket, When not chasing the kids, he spends time golfing, sailing and traveling.

Bret Grady

Sales strategy began early for Bret. As a college student studying economics at Penn State University and working part-time at a retail store, Bret became a top performing salesperson, outpacing even the full-time managers.

Out of college, he was among the youngest and highest performing regional managers for an import company. Bret quickly rose to partner and helped facilitate the sale of the business.

By then, Bret was prepared for his biggest career challenge – transforming the reverse auction industry. A decade ago, when Bret took over Procurex, reverse auctions were used almost exclusively for low-level commodity goods and designed primarily to secure the lowest-cost vendor. Bret knew reverse auctions held so much more money-saving potential for our clients.

Today, with Bret’s leadership, a phenomenal team, and a world-class software platform, Procurex leads web-based auctions for everything from low-level commodities to high-end supercomputers; guard services and all manner of goods. Until recently, many of these goods and services weren’t considered by the industry to be viable candidates for reverse auctions. And he knows, for clients, it isn’t simply about the price. It’s about getting the best fit vendor for the best value.

To ensure success, Bret is always looking for the openings – going right when the crowd zigs left or looking for opportunities everybody else has missed. His hands-on approach to all facets of the business drives Procurex’s operational excellence. From reviewing client RFP specs to exploring the cost drivers of suppliers; Bret thrives in an environment that allows him to lead Procurex to deliver well beyond our client’s expectations.

When you work with Procurex, you are most likely going to hear him ask:

“How can we do this better?”

“How can we serve our clients better?”

“How can we drive more value for our clients and their suppliers?”

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Supercomputers

Even something as complex as Supercomputers can be distilled down to an auction-ready specification that multiple vendors can compete on.

CLIENT

Yale University

STORY

Procurex interviewed IT and research stakeholders to help define a set of minimum performance requirements for the auction specification.

RESULT

Several major vendors participated in the auction and ultimately saved Yale 30% from what they originally budgeted.